Merchants Call on U.S. Regulators to Examine Swipe Fees

Card fees totaled $61.6 billion in 2020, up 137% over the past decade.

January 20, 2022

Visa and Mastercards

ALEXANDRIA, Va.—The Merchants Payments Coalition (MPC) has sent a letter to U.S. antitrust regulators to examine swipe fees charged by major credit card companies in the U.S. after Amazon threated to ban U.K.-issued Visa cards in the U.K. and sequentially reversed the decision.

“As bad as the situation is in the United Kingdom, the pain for merchants is far worse in the United States, which has the highest swipe fees in the industrialized world. Visa’s rates here are four times what they are in the U.K., and the total amount collected is more than 100 times as much. We believe U.S. authorities should look closely at what Amazon has done in the U.K. and need to be aware that many retailers here feel the same. It’s time to bring about competition that will require the U.S. card industry to play under the same rules as any other business,” wrote the MPC. NACS is a member of the coalition.

MPC pointed out that in the U.K., merchants are charged an average 0.55% of the transaction amount for purchases made with Visa credit cards, and those charges totaled $369 million in 2020 when converted from British pounds to U.S. dollars, according to payments consulting firm CMSPI. By contrast, U.S. merchants are charged an average 2.22% for purchases made with Visa credit cards, and those charges totaled $43.5 billion in 2020.

“In addition to the far higher fees charged in the United States, Visa’s market dominance is significantly stronger here than in the U.K. Visa controls only 39% of the credit card market in the U.K., compared with 55% by transaction volume in the United States, while its closest rival, Mastercard, accounts for only 23% of the U.S. market,” the letter states.

Visa and Mastercard account for nearly 80% of the U.S. credit card market, and swipe fees for Visa and Mastercard credit cards combined totaled $61.6 billion in 2020, up 137% over the past decade, according to the Nilson Report.

MPC also writes that processing fees for all types and brands of cards are up 70% over the past 10 years at $110.3 billion in 2020.

“At current rates, merchants receive less than 98 cents on the dollar whenever a credit card is used and have to adjust prices accordingly. Swipe fees are most U.S. merchants’ highest cost after labor and drive up prices paid by the average American family by an estimated $724 a year,” writes the MPC.

Lack of competition in the payments sector has allowed credit card swipe fees to skyrocket, negatively impacting business owners who, to compensate for swipe fees, must increase prices.

In the U.S., credit card swipe fees remain one of the highest operating costs for convenience store retailers after labor, according to NACS State of the Industry data. Consumer preferences for more touch-free transactions and the coin circulation challenge in summer 2020 led to record debit and credit card usage at convenience stores. In 2020, 74.6% of all transactions were paid by plastic, and overall card fees paid by the convenience store industry were $10.7 billion, NACS SOI data indicate.

“U.S. merchants large and small are closely watching the Amazon-Visa developments in the U.K. and hope that U.S. policymakers are doing the same,” the coalition said in the letter. “Few, however, have the size and resources of Amazon that are required to stand up to an entity as powerful as Visa.”